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Source: www.asiaecon.org |

JAPAN'S GDP SHRINKS


Gross Domestic Product, a leading indicator of the economy’s health, shows that there is a long way to go before recovery. Japan’s economy shrank 4.0% in the first quarter, compared to the U.S, which shrank 1.6%. Consumption, investment, government expenditures and net exports affect the growth and stagnation of the country’s economy.


Gross Domestic Product, a leading indicator of the economy’s health, shows that there is a long way to go before recovery. Japan’s economy shrank 4.0% in the first quarter, compared to the U.S, which shrank 1.6%. Consumption, investment, government expenditures and net exports affect the growth and stagnation of the country’s economy.

Households have cut back in spending as the outlook of the economy worsens. Consumer spending dropped 1.1%, which makes a significant difference in the growth of GDP.

Dwindling sales and profits will continue to force companies to reduce expenditures, which include employment and investments in new factories and equipment. Hiroko Ota, Japan’s former Economic and Fiscal Policy Minister said that the reduction in costs will trigger a second trough.

Japanese entrepreneurship is also grim, which further stunts investment. According to Kazuhiko Toyama, chief executive of Industrial Growth Platform, “policies to support ventures have not been that successful.”

Taro Aso,  Japan’s prime minister is spending $160 billion in attempt to stimulate the economy in the form of cash payments to citizens, tax incentives and other programs to encourage consumer spending.

Japan’s economy relies heavily on exporting industrial products, such as cars and TVs. Exports have decreased considerably as well. In recent months, the yen has strengthened, making Japanese products more expensive and less competitive, causing demand to fall further. Motor vehicle exports, for example, have deteriorated by 64.7% from April 2008, according to the Japan Automobile Manufacturers Association.

The worldwide fall in demand for industrial products have forced companies to limit and cut costs, increasing layoffs and foregoing investments.

The grim outlook of Japan’s economy, the second largest in the world, reflects the uncertainty of the global recession.

“Japan’s recovery may be W-shaped. The worst is over but I can’t say the economy is heading for a recovery at all,” said Ota.

Source: www.asiaecon.org |


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